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Arkansas to receive $13.5 million in settlement with e-cigarette maker

Congress is trying to crack down on teenagers and young adults using tobacco products, including e-cigarettes.
Tony Dejak
/
AP
Congress is trying to crack down on teenagers and young adults using tobacco products, including e-cigarettes.

Arkansas Attorney General Leslie Rutledge announced Wednesday a $438.5 million agreement in principle between JUUL Labs and 34 states and territories resolving a two-year investigation into the e-cigarette manufacturer’s marketing and sales practices. Arkansas will receive $13,553,391.88 over five years as part of the agreement.

In addition to the financial terms, the settlement would force JUUL to comply with a series of strict injunctive terms severely limiting their marketing and sales practices.

“It is the fault of companies like JUUL who spread misinformation and incentivized youth to buy vaping products that created this epidemic that continues to be a prevalent problem in our schools and neighborhoods,” said Rutledge. “After a two year investigation, I am holding JUUL accountable for their actions with the assurance that they will comply with the law in the future because Arkansans deserve to be protected from deceptive business practices.”

JUUL was, until recently, the dominant player in the vaping market. According to Rutledge, the multi-state investigation revealed that JUUL rose to this position by willfully engaging in an advertising campaign that appealed to youth, even though its e-cigarettes are both illegal for them to purchase and are unhealthy for youth to use.

The investigation found that JUUL relentlessly marketed to underage users with launch parties, advertisements using young and trendy-looking models, social media posts and free samples. It marketed a technology-focused, sleek design that could be easily concealed and sold its product in flavors known to be attractive to underage users.

JUUL also manipulated the chemical composition of its product to make the vapor less harsh on the throats of the young and inexperienced users. To preserve its young customer base, JUUL relied on age verification techniques that it knew were ineffective, according to Rutledge.

The states are in the process of finalizing and executing the settlement documents, a process that takes approximately 3-4 weeks. The $438.5 million would be paid out over a period of six to ten years, with the amounts paid increasing the longer the company takes to make the payments.

If JUUL chooses to extend the payment period up to 10 years, the final settlement would reach $476.6 million. Both the financial and injunctive terms exceed any prior agreement JUUL has reached with states to date.

The agreement also includes sales and distribution restrictions, including where the product may be displayed or accessed in stores, online sales limits, retail sales limits, age verification on all sales, and a retail compliance check protocol.

This story comes from the staff of Talk Business & Politics, a content partner with KUAR News. You can hear the weekly program on Mondays at 6:06 p.m.